Vono to discontinue production of foam blocks

Ernst & Young, the independent auditors to the members of Vono Products plc in their recent report have said that the company (Vono Products plc) had recorded a negative

Ernst & Young, the independent auditors to  the members of Vono Products plc in their recent report have said that the company (Vono Products plc) had recorded a negative working capital of N666million in 2010, compared with a negative working capital of N610million in 2009.

In the report presented to shareholders at the 50th annual general meeting (AGM) of Vono Products plc in Lagos, the independent auditors said: “without qualifying our opinion, we are bringing to the attention of all, that this means the company incurred a net loss of N397million for the year ended December 2010, compared with N254million in 2009.

“As at that date, the company had a negative working capital of N666 million in 2010, compared with a negative working capital of N610 million in 2009.

Ernst & Young went on to say, that these conditions indicate the existence of material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern,” the auditors stated.

The  company however announced its full year result, showing a decline in turnover  of N437.3 million for the year under review, as against N447.8 million in 2009.  Loss Before Tax (LBT) increased from N247.9 million in 2009 to N393 million in 2010, resulting in a Loss After Taxation (LAT) of N396.9 million, as against N253.5million for the corresponding period in 2009.

According to the register of members, shareholders that held more than 5 percent of the issued share capital of the company as at December 31, 2010 included: Spring Bank plc which held 16,699,318 shares representing 5.56 percent of issued share capital; BGL WMP/GAD held 22,119,944 shares (7.37percent); and Vitafoam Nigeria plc which held 74,884,408 shares (24.96 percent).

The company’s profit and loss account shows that its loss per share has risen from 85 kobo in 2009 to 132 kobo in 2010.

As a going concern, in recognition of the need to reinvigorate the company’s operations, a new core investor, Vitafoam Nigeria plc acquired substantial shareholding in the company. The new investor is taking steps to inject fresh capital into the capital and restructure its operations.  At the moment, the company  has proposed a right issue of 525million shares, to existing shareholders to which an all parties meeting has been held.

Speaking during the AGM, Bashiru Adetomiwa Lasisi, chairman, Vono Products plc said: “Among the grave challenges faced by the company during the year which almost threatened its going concern status ,include lopsided gearing ratio. 

The huge exposure to bank debt which could not be reconciled against dwindling performance, resulted in litigation by a bank, lasting most part of the year preceding the current board.”

Lasisi further said, “A great deal of efforts and initiatives are being implemented to gradually stabilise the company, after the end of the financial year (2011). These initiatives are intended to refocus the company into its core competence area in line with the vision of the founding fathers of the company. Vono will discontinue production of foam blocks and concentrate on domestic needs while exploring the synergy with other reputable foam manufacturers for the polyurethane content of the present operation. “To this end, the company is investing in products development and innovation, with a view to creating a competitive edge in the rapidly developing furniture industry. We will also leverage and develop our established distribution network across the country to expand and grow the furniture line.”